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How am I doing for retirement?
Old 03-11-2016, 12:13 PM   #1
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How am I doing for retirement?

I would like to share my financial situation with you in hopes that you can help me evaluate and formulate a solid investment strategy.

Here are my current holdings:
  • $28K in Money Market Savings
  • $13K Roth IRA $10K in Wealthfront (90% stock / 10% bonds)
  • $3.5K in Betterment (90% stock / 10% bonds)
  • $2.5K in Acorns.com (90% stock / 10% bonds)
  • $46K in Fidelity Rollover IRA - Me
  • $20K in Fidelity IRA - Wife
  • No debt. I make about $150-175K yr

I have one rental property out of state worth $315K conservatively with a $180K balance on 1st and $9K balance on HELOC.

Wife and I are about 35 yrs in age. We have very little debt.

I'd like to know: Am I on track for retirement? What, if any, additional investments could I make that would be financially responsible or should I just keep saving?

Thanks!
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Old 03-11-2016, 12:31 PM   #2
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To me, that is not much saved. What are your expenses?

You have ~$110K. I had much more than that when I was 35, over 20 years ago. Even if you double every 5 years, it's still not much.
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Old 03-11-2016, 12:32 PM   #3
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JPMorgan put out (among other things) this picture:


You didn't mention how much your family income is. I'll ballpark your investments at ~$210k. So based on the chart, if your family income is around $100k you should be on track.

Look at the chart and decide for yourself. Ask yourself, "What kind of money do I really want/need in retirement ?" Then plan towards that.

Also go check out the "BallPark" retirement calculator:
http://www.choosetosave.org/ballpark/
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Old 03-11-2016, 12:39 PM   #4
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No, you are not on schedule according to this table (see page 15 of the link)

https://am.jpmorgan.com/blob-gim/138...456/JP-GTR.pdf

According to that at age 35 you should have about 2.4 times your household income saved... which would be $360 - 420k and you have $110k in financial assets and $126k of equity in the rental property... so you are behind according to this guideline.

I suggest that you get a copy of Quicken if you don't already have it and run your situation through Quicken Lifetime Planner to get a more detailed analysis on if you are saving enough.
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Old 03-11-2016, 12:39 PM   #5
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Originally Posted by Senator View Post
To me, that is not much saved. What are your expenses?

You have ~$110K. I had much more than that when I was 35, over 20 years ago. Even if you double every 5 years, it's still not much.
Well, I spent a bit of money on the downpayment and renovation of the rental property. We're actually 32 in age... I just said 35 to round it out (and because I didn't necessarily want to reveal too much personal info).

Quote:
Originally Posted by MasterBlaster View Post
JPMorgan put out (among other things) this picture:


You didn't mention how much your family income is. I'll ballpark your investments at ~$210k. So based on the chart, if your family income is around $100k you should be on track.

Look at the chart and decide for yourself.


Also go check out the "BallPark" retirement calculator:


Choose to SaveŽ
I make $155K a year. My wife doesn't make much after deductions. We'd be comfortable living at $100K if we didn't live in California which kills us on taxes.

Our monthly debts are $1000 / month for Child Support, ending in five years... I know, ouch and it is going to double soon.

We have very little debt other than that. Wife has 5K left on student loan with low interest rate and we have combined 5K in credit card debt that will soon be paid off.

I net about $5K /month after taxes and insurance. Our rent is $2150 in Los Angeles. That leaves about half of my net income to save, pay utilities, incidentals, etc. And we're going to need to purchase or lease a vehicle in the next year too.

I'm not sure how I will be able to save enough to close the gap in what I need for retirement.
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Old 03-11-2016, 12:52 PM   #6
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When I was 35 I had $45k in credit card debt, a mortgage of $135k and also paid child support...and lost my job at age 38. Things were much worse than you have, but I was able to turn things around and did some serious saving. I also got remarried to someone who also was a serious saver. Your income will likely grow and you save and invest the majority of that instead of spending it. We were financially independent at 56 and I retired when my health told me to. My wife is retiring this year and we're 59 with a healthy nest egg.
Focus on the goal and you'll be fine. I think you're doing great!


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Old 03-11-2016, 01:05 PM   #7
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Quote:
Originally Posted by geoffblinks View Post
We'd be comfortable living at $100K if we didn't live in California which kills us on taxes.
Obviously, this is the significant sentence, as I read it. Have you considered making a change here?

Really, tracking (and generally reducing) your actual expenses is the biggest single key to reaching the goal.
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Old 03-11-2016, 01:09 PM   #8
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Obviously, this is the significant sentence, as I read it. Have you considered making a change here?

Really, tracking (and generally reducing) your actual expenses is the biggest single key to reaching the goal.
I'd say we're pretty good at tracking and managing expenses - it's the expenses outside of our control that are tough to manage: rent / taxes.

We're open to moving given we have a good strategy in place. One option is for us to move back to Boston where our rental is and take it back over. That would drop our housing expense down from
$2150 to about $1300 / month. Not insignificant.

Also, moving across country, getting new jobs, etc is a pain in the ass and not cheap.

That said, we're open to the idea...as much as we aren't excited about the cold.
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Old 03-11-2016, 01:59 PM   #9
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Hi - I also live in SoCal - and didn't have your income.
One of the ways to tackle the taxes is to divert more to 401k savings. Your rent isn't that bad for LA. My nephew pays more for a place in a semi-sketchy area.

I assume your rental cashflows... in other words rents cover the mortgage and expenses. If not - why are you doing it? We looked at rental properties after the real estate crash in 2008... even with the prices down and looking at short sales and foreclosures we couldn't find many that cashflowed. Perhaps because we wanted them local to us (less than 30 minute drive). Most went into bidding wars even though rents wouldn't cover a 25% down mortgage.

What are the expense ratios of the funds you listed? I'm a big fan of DIY investing in low cost index funds. Use one of the big companies known for low cost index funds. (Vanguard, Fidelity, Schwab). Pick a total stock index fund and a total bond index fund... rebalance once a year.

Keep saving!!!
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Old 03-11-2016, 02:06 PM   #10
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Hi - I also live in SoCal - and didn't have your income.
One of the ways to tackle the taxes is to divert more to 401k savings. Your rent isn't that bad for LA. My nephew pays more for a place in a semi-sketchy area.

I assume your rental cashflows... in other words rents cover the mortgage and expenses. If not - why are you doing it? We looked at rental properties after the real estate crash in 2008... even with the prices down and looking at short sales and foreclosures we couldn't find many that cashflowed. Perhaps because we wanted them local to us (less than 30 minute drive). Most went into bidding wars even though rents wouldn't cover a 25% down mortgage.

What are the expense ratios of the funds you listed? I'm a big fan of DIY investing in low cost index funds. Use one of the big companies known for low cost index funds. (Vanguard, Fidelity, Schwab). Pick a total stock index fund and a total bond index fund... rebalance once a year.

Keep saving!!!
We cash flow about $500/month on the rental and I put 100% of that back towards the principal on the HELOC. Once the HELOC is paid off, I will put 100% of the cash flows back to principal on the 1st.

Betterment / Wealthfront / Acorns all charge about .25% year in fees.
Most of my Fidelity is in FIDELITY FREEDOM 2050 which has .75% expense ratio.
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Old 03-11-2016, 02:51 PM   #11
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At your age, I had essentially a negative net worth. I had just purchased a home and had less in savings than the mortgage amount. So, don't think it is not possible. I paid off the mortgage at 43 and then at 55 went part time to practice retirement. After two years, I pulled the plug. Looking back, the key was controlling expenses to LBYM.
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Old 03-11-2016, 02:58 PM   #12
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First, as I'm sure you now realize, you'll receive some fairly blunt responses here. Some are intended as tough love and that's fine. Others are rather mean spirited-but they typically come from a select few individuals. Don't give up, there's a tremendous wealth of insight here.

That said, I would tend to agree with the general vibe in response to your initial post. In relation to the amount of money you are currently earning, you have not saved enough. Could this be because you've only recently started to earn that level of income? Maybe. Or that you've encountered an unforeseen drain on $ in the form of illness/divorce or something along those lines on your journey?

Regardless, you're young with time on your side and a nice income. If you are looking to retire at a traditional retirement age, you're probably OK as is. Since this is a forum devoted to RE, the responses are geared toward just that. If you hope to retire at 50 or sooner and draw down at the level you stated-you have some ground to make up. Watching your spending a bit closer will help tremendously. Good luck!
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Old 03-11-2016, 03:02 PM   #13
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Is your wife's income included in the 150-175K..what is the household income. You say your wife doesn't make much after "deductions" what does that mean?

It looks like your wife needs to start searching for a better paying job..that's about the only way you can stay in Cali and improved your nest egg.
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Old 03-11-2016, 03:04 PM   #14
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Is your wife's income included in the 150-175K..what is the household income. You say your wife doesn't make much after "deductions" what does that mean?

It looks like your wife needs to start searching for a better paying job..that's about the only way you can stay in Cali and improved your nest egg.
Wife makes about $35k gross yr. She's a new realtor and for the last two years, she has nearly written off her entire income towards expenses involved in being an agent. I am not including her income in the 150K amount.
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Old 03-11-2016, 03:07 PM   #15
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I think you're doing ok for your age. You have decent assets saved up and have a nice income. If you can manage to stash away 20-25% of your income for the next 15 years, combined with what you already have, you could have about $1.2m in today's dollars (by the time you're 50). While that may not lend itself to a lavish FIRE lifestyle in SoCal, it is a decent amount that you could consider moving to a cheaper COL area with and FIRE.
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Old 03-11-2016, 03:10 PM   #16
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Originally Posted by geoffblinks View Post
.....I make $155K a year. My wife doesn't make much after deductions. We'd be comfortable living at $100K if we didn't live in California which kills us on taxes......

I net about $5K /month after taxes and insurance. ...
If you make $155k a year you should be netting much more than $5k a month, even unless your insurance is crazy expensive or if you are putting a lot towards retirement savings.

This is with married and 2 exemptions from Salary Paycheck Calculator | Payroll Calculator | Paycheck City.

Monthly Gross Pay ..........................$12,916.67
Federal Withholding...........................$2,177.50
Social Security.....................................$800. 83
Medicare.......................................... ...$187.29
California........................................ ....$824.26
SDI............................................... .....$116.25

Net Pay............................................$8, 810.54
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Old 03-11-2016, 03:11 PM   #17
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I think you're doing ok for your age. You have decent assets saved up and have a nice income. If you can manage to stash away 20-25% of your income for the next 15 years, combined with what you already have, you could have about $1.2m in today's dollars (by the time you're 50). While that may not lend itself to a lavish FIRE lifestyle in SoCal, it is a decent amount that you could consider moving to a cheaper COL area with and FIRE.
I just don't see how I can feasibly save 20-25% a year of my income and still afford to live here.

What is a FIRE lifestyle?
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Old 03-11-2016, 03:11 PM   #18
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We cash flow about $500/month on the rental and I put 100% of that back towards the principal on the HELOC. Once the HELOC is paid off, I will put 100% of the cash flows back to principal on the 1st.

Betterment / Wealthfront / Acorns all charge about .25% year in fees.
Most of my Fidelity is in FIDELITY FREEDOM 2050 which has .75% expense ratio.
Good news on the rental cash flowing. As I said - we looked at purchasing rental(s) and found it impossible to find cashflowing ones.

The biggest factor is to watch your spending. I found that the more I diverted to saving, the more I learned to live well on less... Which helps the retirement budget when you retire in the future. Look at recurring expenses as your easiest way to trim the budget... Cell phones- do you need to go with the high end/expensive companies like ATT and Verizon - or can you get by with t-mobile, ting, etc. Cable/internet - if you haven't already, call and complain and threaten to cancel... when you finally get transferred to a retention specialist you'll get a more favorable price. (This has to be done annually.) Do you need HBO and Netflix and Amazon Prime... pick one. Watch how much you spend eating out... and if you do eat out - get doggy bags so you can take the leftovers for lunch the next day. Get a nice water bottle and fill it, rather than buying plastic disposable water bottles. Make coffee rather than swinging by starbucks every day....

I'm not saying all of the above applies... but those are all things that I looked at and had a pretty big budget impact once I made some minor lifestyle changes.
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Old 03-11-2016, 03:13 PM   #19
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....I'm not sure how I will be able to save enough to close the gap in what I need for retirement.
That is one place where putting your situation into QLP will be helpful.... you can play with various assumptions to see what you need to do to save what you need.
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Old 03-11-2016, 03:15 PM   #20
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I just don't see how I can feasibly save 20-25% a year of my income and still afford to live here.

What is a FIRE lifestyle?
FIRE stands for Financially Independent Retire Early.

It's used as code for LBYM - live below your means.

The savings part is the challenge - but if you divert it into a 401k - you get the tax benefit now... which means the 20-25% doesn't hit your net pay at 20-25%... because you now have less taxable income - and pay less taxes. Maxing out (to the federal max) was a BIG adjustment for me ... so I did it incrementally. I'd been saving 10% - I bumped it to 15% one year, then 20% - which put me close to the federal max... then bumped it up to reach the max earlier in the year.
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